“The upside room for ratings is limited but downside risks
are captured adequately now,” Aninda Mitra, a sovereign analyst
at Moody’s, said in a telephone interview from Singapore today.
He said the economy may grow about 3 percent in the year ending
June 30, less than the 4.5 percent estimated before the floods.

Moody’s, which raised Pakistan’s credit-rating outlook to
stable from negative in August last year, rates the nation’s
foreign and local-currency debt at B3, six levels below
investment grade.

The floods have displaced about 20 million people,
submerged 1,500 kilometers (930 miles) of roads, destroyed $1
billion of crops and killed 10 million heads of livestock. The
benchmark Karachi Stock Exchange 100 Index has tumbled about 8
percent this month, the worst performer after Vietnam’s market
among 93 major global indexes tracked by Bloomberg.

“The impact could be much more severe for Pakistan’s
agriculture and overall gross domestic product growth than was
previously thought,” Mitra said.

As much as 25 percent of cotton-growing areas may be
affected, according to Nishat Mills Ltd., the country’s biggest
textile exporter. Pakistan is the world’s fourth-biggest cotton
producer.

Toyota Motor Corp. and Unilever affiliates in Pakistan said
this month the floods may sap growth and force production cuts
as consumers struggle to cope with the destruction of crops and
houses.

Moody’s Mitra said it isn’t clear that the floods will have
“any obvious or immediate adverse impact” on Pakistan’s
ability to repay debt.